Westpac's multi-brand strategy brings in the money

Westpac is pushing ahead with its plan to use a range of bank brands to target customers who don't want to bank with one of the majors.

The head of Westpac's Australian Financial Services division, Brian Hartzer, defended the bank's "multi-brand" strategy on Tuesday, saying it was a key plank of its plan to extract growth in a sluggish credit environment.

He also said the value of stressed loans held by Westpac had fallen by $1.2 billion since 2010 to its lowest level since 2009.

Thanks to a series of takeovers in recent years, Westpac has amassed wide range of brands including St George, BankSA, Bank of Melbourne, and RAMS

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But some analysts have questioned if the strategy is right for an era of slow credit growth, because of the extra costs of maintaining the different brands.

In his first major analyst briefing since starting at Westpac last year, Mr Hartzer said the multi-brand approach was a key part of its response to a "challenging" external market.

"We know from research that there's a good chunk of the population that, for whatever reason doesn't want to bank with a big bank," he said.

"Our view is by having alternate brands available to us we're able to put an offer in front of a bigger portion of the potential profit pool than we would if we were limited to just the one brand."

Mr Hartzer, who has been tipped as a likely successor to current chief executive Gail Kelly, said the bank had focused on defining each of its brands so they did not compete with other Westpac offerings.

"The trick is to make sure that as much as possible those brands are complementing each other rather than just competing head to with each other," he said.

Mr Hartzer argued that Bank of Melbourne, which Westpac launched in 2011 to boost its presence in Victoria, was proof the strategy was paying off.

Over the year to December, he said Bank of Melbourne's deposits had grown at more than four times the pace of the market, while credit had grown at twice the industry pace.

We know from research that there's a good chunk of the population that, for whatever reason doesn't want to bank with a big bank

Westpac's St. George franchise is also targeting the market for business lending, where it has a market share of just 8 per cent, compared with its consumer market share of 12 per cent.

Mr Hartzer also told analysts the bank would continue to chase customer deposits aggressively as part of a move to strengthen its balance sheet.

The value of stressed assets across his division had fallen to its lowest level since 2009 in the first quarter of 2013, he said.

While Westpac's multi-brand strategy has come under criticism from market analysts, credit unions and mutual banks have also called for tougher rules on disclosure of who owns alternative brands, claiming some customers are unaware of ownership structures.